The Validity of Karl Marx's Critique of Classical Political Economy - Essay Example

?The Validity of Karl Marx’s Critique ical Political Economy By The Validity of Karl Marx’s Critique ical Political Economy Introduction Marx’s critique of classical political economy is essentially an expression of his own conceptualization of capitalism.1 Marx essentially argued that the greatest difficulty with classical political economists was that they did not take a detailed account of historical developments in society.2 Marx claimed that the classical political economy had emerged as a result of historical developments to a natural progression toward capitalism.3 Marx was informed by historical methods of production such as slavery and feudalism which were later transformed to capitalism.4 Marx’s use of history and logic makes it difficult to dismiss his criticism of classical political society. However, his criticism of the classical political economy has been the subject of study and debate in the social sciences and economics since Marx’s writings in the 19th century. This paper examines the core elements of Marx’s Critique of Classical Political Society and identifies the validity of its theoretical underpinnings. Overview At the heart of Marx’s critique of classical political economy were three basic assumptions. First, capitalism was a commercial system grounded in productivity and transferring private property in a liberal market. Secondly, property was valued by reference to the extent of human work put into production. Thirdly, the classical political economy involves a capitalist state where competition and profits give way to exploitive behavior tensions between classes. What often occurs is too much production which leads to crises which in turn threaten the capitalist state. Thus historically, capitalism will prove to be inefficient and inequitable in terms of protecting the individual and “social welfare”.5 The recurring theme in Marx’s critique of classical political economy is Marx’s attention to David Ricardo’s theory of value. For Marx, classical political economy was flawed by virtue of its inconsistent logic and methodology and thus rendered it incapable of explaining and developing an efficient political economy.6 Essentially Marx was of the opinion that classical economics overvalued production and failed to appreciate the production throughout history has always shared similar elements. Classical political economists failed to distinguish between the common elements of production throughout history and the elements of production specific to capitalism. For the most part, production and labour in capitalist societies were the main sources of “income” and “power of the dominant social class”.7 Thus a prominent theme in Marx’s critique of classical political economy was his focus on value theory and the idea that capital conferred power on the elites as a result of its ability to deliver profits. Value Theory Marx identified four theoretical flaws in Ricardo’s value theory that form the bases of his critique of classical political economy. The four theoretical flaws were, the theory of wage labour; the theory of capital and exploitation; the theory of completion and the theory of rent.8 Each of Marx’s theoretical flaw sin value theory are analyzed below. Theory of Wage Labour Marx took the position that the value theory was flawed for its predisposition to place a value on property by reference to the labour value applied to production of the property or commodity. For Marx, this explanation was intrinsically flawed as it made no sense for the value of a specific commodity to rely on another commodity’s value. Classical political economy could not provide an adequate explanation for this theory of value. Marx specifically stated: Labour itself has exchange-value and different types of labour have different exchange-values. If one makes exchange-value the measure of exchange-value, one is caught up in a vicious circle, for the exchange-value used as a measure requires in turn a measure. This objection merges into the following problem: given labour-time as the intrinsic measure of value, how are wages to be determined on this basis. The theory of wage-labour provides the answer to this.9 From Marx’s perspective, labour was either valued in its own right or it was not. On the other hand, the value of property or commodities had different values. Property and commodities were measured in terms of both “use-value”, “value” and “surplus value”.10 Marx’s critique of value theory in this regard is valid in that labour is valued in terms of wages for productivity and only in this regard is the property, commodity and service produced by labour derives its value. However, the thing produced has additional value and this value is generated by the use of the service, property or commodity. When the service, property of commodity produced is produced to the extent that there are insufficient to meet the demand or are overproduced a surplus value will further determine its value. Marx intended that value was determined by the amount of labour used to produce rather than the value attached to that labour. For Marx, labour was a “human activity” rather than a “commodity”.11 Labour as a human activity was not purchased nor sold and as such it did not have a value because value was applicable solely to property.12 Marx took the position that labour was not priced and to say that it labour had a price was illogical. When an individual purchases gold, the individual is purchasing a commodity rather than the labour attached to producing the gold.13 Certainly, from the purchaser’s perspective property and commodities and quite often services are not purchased with any thought about the price of labour in mind. However, from the perspective of the vendor, the thing sold is valued and priced in terms of the wages paid to produce it. While the wages paid for the labour are not the only factor, it is certainly and important factor. Likewise, when determining wages, the employer/producer takes account of the likelihood of selling the commodity at a price that would offset the wages paid to produce it. Marx argued however, that the value of labour aligned with the power implicit in its value. Thus labour was valued pursuant to the amount of labour needed relative to the surrounding social factors needed for ensuring that labour could be acquired. Labour was valued in accordance with the time required to produce and that which was necessary to ensure that workers were able to survive and have the ability to work.14 In many ways this is true, labour is priced in terms of productivity and the worker’s physical and/or mental ability to produce. Whether or not the worker’s ability to survive comes into play is another question entirely. It would appear that human rights and labour laws set parameters for ensuring that workers are not forced into slavery and do not work in unsafe and unhealthy environments. The Theory of Capital and Exploitation Marx contended that one of the most serious difficulties with the classical political economy was its failure to provide an effective theory of surplus value. Marx stated that: If the exchange-value of a product equals the labour-time contained in the product, then the exchange-value of a working-day is equal to the product it yields, in other words, wages must be equal to the product of labour. But in fact the opposite is true. Ergo, this objection amounts to the problem, - how does production on the basis of exchange-value solely determined by labour-time lead to the result that the exchange-value of labour is less than the exchange-value of its product? This problem is solved in our analysis of capital.15 Marx was essentially questioning the logic behind the Adam Smith led proposition that the value attached to commodities were analogous to the labour used to produce them. Marx believed that the main value attached to commodities arose out of the exchange process where commodities were priced and exchanged for that price. If the value of commodities corresponded with the labour invested in it, then the commodity would necessarily belong to the workers who “produced it?”16 Indeed Ricardian theorists propose that the workers were entitled to the “full fruits of its labour”.17 For Marx however, the Ricardian theorists were unable to make the connection between the fact that workers could be compelled to work and the fact that they also were at liberty to refused and could choose between jobs. Mark stated that in order to make the connection, it was imperative that labour be distinguished from labour power.18 In this regard, a surplus of labour is necessary on an economic basis for the all classes in society. If businesses and employers only put forth resources that were necessary to provide workers with the sustenance to survive, then the unemployed would not survive.19 Marx’s argument on surplus labour in the context of his criticism of Ricardian socialists thinking in the classical political economy is entirely valid. Businesses have historically produced much more than the bare necessities. The practice has always been to produce as much as resources will allow and the goal was always to produce more than enough to sustain sales and to drive up profits. With the industrial revolution, the capacity to produce improved and gradually mass production did in fact give way to a culture of mass consumption20. The Theory of Competition Classical political economy proposed that fluctuation in prices in the market corresponded with demand and supply. Marx did not take issue with this explanation. However, Marx was opposed to the idea that prices naturally corresponded with the value of labour. Marx observed: In accordance with the changing conditions of demand and supply, the market-price of commodities falls below or rises above their exchange-value. The exchange-value of commodities is, consequently, determined not by the labour-time contained in them, but by the relations of demand and supply. In fact, this strange conclusion only raises the question how on the basis of exchange-value a market-price differing from this exchange-value comes into being, or rather, how the law of exchange-value asserts itself only in its antithesis. This problem is solved in the theory of competition.21 Marx reconciled the conflict between the classical political economists contention that prices were driven by demand and supply and that prices were aligned with labour by reference to the theory of competition. It was competition that stabilized the prices in the market rather than demand and supply.22 Moreover, competition not only influences pricing in the market but also influences unpaid labour practices. For instance a baker feeling the pressure of competition in the market will lower his or her prices and ultimately do all that he can to get as much as possible out of his workers in terms of productivity and by doing so, does not increase the wages of the worker.23 It would appear however, that both demand and supply together with competition has an impact on market prices. It is well known among economists that if demand exceeds supply, the prices will typically be higher. If supply exceeds supply, the prices will typically be lowered. Similarly, competition can also influence pricing practices. When businesses are faced with competition, a common strategy for besting the competition is the lowering of prices so as to lure consumers away from the competition. Thus Marx’s critique of classical political economy is valid. It does not necessarily mean that the worker will be forced to produce more without adequate compensation. In an ideal case, if productivity is high as a result of demands, the worker will be compensated for meeting the demands of consumers. The simple reality is that the capitalist will naturally follow trends that produce profits and will simply abandon unprofitable markets and pursuits.24 Theory of Rent As previously noted, Marx took issue with the classical political economist contention that commodities were valued in terms of labour time, wages and production. Marx demonstrated that for capitalists, exchanges of labour and commodities did not fully explain value. There were other exchanges that could explain capitalist pursuits and the political economy. Specifically, Marx argued that: The last and apparently the most striking objection, if not raised in the usual form of queer examples: if exchange value is nothing but mere labor-time contained in commodities, how can commodities which contain no labour possess exchange-value, or in other words, whence the exchange value of mere forces of nature? The problem is solved in the theory of rent.25 Marx explained the exchange values attributed to capitalism by illustrating how these exchanges went beyond the mere exchanges implicit in producing commodities (labour) and offering them for sale. If an employer found or used a tool that increased productivity, he may offer that tool for rent to another employer and thus would be improving the value of a commodity without having to use labour to obtain that value.26 It therefore follows that labour is not the only means by which commodities are valued. Certainly other exchanges drive value and are quite often not related to labour. It can be argued however, that value is implied from the rate and prices attached to exchanges. This would apply to commodities, labour and all other forms of exchanges. Rather, the price of commodities and the wages of labourers are indications of the value attached to commodities and the work necessary for producing it. Conclusion Marx’s critique of classical political economy exposes the flaws in the analysis of value. Specifically Marx takes a practical approach to rebutting the concept that labour is aligned to the value of commodities. Marx examines the history of labour and production and its progression. By doing so, Marx realistically points out that capitalism has emerged to demonstrate that the value of commodities is distinct from labour. In fact, Marx points out that labour is often exploited in the pursuit of profits which is often driven by competition. Prices are constructed around market forces such as competition, demand and supply and labourers are used to respond to these forces. Although Marx takes a rather cynical view of class distinctions in the division of society between the employer and the employed, his made some very valid points. Workers will be exploited if they allow it, but quite often, employers will recognize that productivity is best achieved by taking care of its workers and ensuring that morale is high enough to improve productivity. Bibliography Blaug, M. (1996) Economic Theory in Retrospect. Cambridge, UK: Cambridge University Press. Clarke, S. (1982). 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